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INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The domestic and foreign components of loss before income taxes were as follows (in thousands):
Year Ended December 31,
202220212020
Domestic$(216,573)$(185,216)$(126,624)
Foreign24,724 7,225 5,847 
Loss before income taxes$(191,849)$(177,991)$(120,777)
Income tax expense consisted of the following (in thousands):
Year Ended December 31,
202220212020
Income tax expense:
Current:
Federal$— $— $— 
State— — 133 
Foreign500 886 686 
Subtotal500 886 819 
Deferred:
Federal— — — 
State— — — 
Foreign(71)(580)(474)
Subtotal(71)(580)(474)
Income tax expense$429 $306 $345 
The difference between the income tax expense and the amount computed by applying the federal statutory income tax rate to loss before income taxes is explained as follows (in thousands):
Year Ended December 31,
202220212020
Tax at federal statutory rate$(40,288)$(37,372)$(25,363)
State taxes, net(6,895)(6,734)(3,168)
Foreign rate differential309 362 376 
Global Intangible Low-taxed Income1,002 637 1,335 
Non-deductible stock-based compensation3,545 2,770 4,232 
Research credits(6,694)(5,230)(3,657)
Change in valuation allowance44,005 45,373 26,537 
Transfer pricing settlement4,343 — — 
Other1,102 500 53 
Income tax expense$429 $306 $345 
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
December 31,
20222021
Assets:
Deferred tax assets:
Net operating loss carryforwards$174,129 $159,740 
Research and development tax credit carryforwards44,264 35,260 
Stock-based compensation7,695 6,691 
Deferred revenue38,700 61,114 
Capitalized research37,985 — 
Fixed assets10,087 10,130 
Lease liability10,074 11,279 
Accruals and reserves1,603 1,119 
Other283 106 
Total deferred tax asset324,820 285,439 
Valuation allowance301,840 259,820 
Deferred tax assets22,980 25,619 
Liabilities:
Intangible assets(13,512)(13,856)
Operating lease right-of-use assets(14,620)(17,348)
Deferred tax liabilities(28,132)(31,204)
Total net deferred tax liabilities$(5,152)$(5,585)
The deferred tax assets and liabilities based on tax jurisdictions are presented on the Consolidated Balance Sheets as follows (in thousands):
December 31,
20222021
Deferred tax assets (included in Other non-current assets on the Consolidated Balance Sheets)$1,118 $1,060 
Deferred tax liabilities(6,270)(6,645)
Net deferred tax liabilities$(5,152)$(5,585)
A valuation allowance is recorded when it is more likely than not that all or some portion of the deferred income tax assets will not be realized. The Company regularly assesses the need for a valuation allowance against its deferred income tax assets by considering both positive and negative evidence related to whether it is more likely than not that the Company’s deferred income tax assets will be realized. In evaluating the Company’s ability to recover its deferred income tax assets within the jurisdiction from which they arise, the Company considers all available positive and negative evidence, including scheduled reversals of deferred income tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. Accordingly, based upon the Company’s analysis of these factors the net deferred tax assets have been substantially offset by a valuation allowance. The valuation allowance increased by $42.0 million, $45.5 million and $26.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.
As of December 31, 2022, Sangamo had net operating loss carryforwards for federal and state income tax purposes of approximately $689.7 million and $312.0 million, respectively. The federal net operating loss generated before 2018 will begin to expire in 2023 and will keep expiring through 2037, if not utilized. Federal net operating loss generated from 2018 will carry forward indefinitely. If not utilized, the state net operating loss carryforwards will begin to expire in 2029, respectively. The Company’s French net operating loss carryforward balance is $115.6 million, which carries over indefinitely. The Company also has federal and state research tax credit carryforwards of $36.8 million and $26.1 million, respectively. The federal research credits will begin to expire in 2023 and will keep expiring through 2042, while the state research credits have no expiration date. Utilization of the Company’s net operating loss carryforwards and research tax credit carryforwards may be subject to substantial annual limitations due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. The annual limitation could result in the expiration of the net operating loss carryforwards and research tax credit carryforwards before utilization.
The Company’s policy is to reinvest the earnings of its non-U.S. subsidiaries in those operations. The Company does not provide for U.S. taxes on the earnings of foreign subsidiaries because the Company intends to reinvest such earnings offshore indefinitely. However, if these funds were repatriated, the Company would be required to accrue and pay applicable U.S. taxes and withholding taxes. Due to the cumulative losses generated in foreign countries there are no earnings to repatriate.
The Company files federal and state income tax returns with varying statutes of limitations. The tax years from 2002 forward remain open to examination due to the carryover of net operating losses or tax credits. The Company also files the United Kingdom and French income tax returns, and the tax years from 2008 and thereafter remain open in the United Kingdom, and the tax years 2018 and thereafter in France are still subject to examination.
The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2022, the Company had $0.2 million accrued interest and/or penalties. The unrecognized tax benefits may change during the next year for items that arise in the ordinary course of business. In the event that any unrecognized tax benefits are recognized, the amount that would impact the effective tax rate was $1.2 million, $1.2 million, and $0.6 million as of December 31, 2022, 2021 and 2020, respectively.
The following table summarizes the activity related to the Company’s unrecognized tax benefits (in thousands):
December 31,
202220212020
Beginning balance$15,062 $12,892 $11,630 
Additions based on tax positions related to the current year3,177 2,454 2,834 
Additions for tax positions of prior years278 130 1,982 
Reductions for tax positions of prior years(338)(414)(3,554)
Ending balance$18,179 $15,062 $12,892